Frugal. By Nature.

My thoughts on the tax rebates

Well, the fate of economic stimulus bill is now in the hands of President Bush. He’s expected to sign it next week, which would put $300 to $1200+ into the hands of most Americans via tax rebate checks.

Now, I’m not going to balk at this rebate. If it passes, we’ll get $2100. What I do balk at is the fact that the government is going even deeper into debt to help Americans do something they should not be doing…. spending money on things they don’t need.

The tax rebates are targeted at the lower to middle classes… because they are the most likely people to go out and blow a windfall, I suspect. The truth is, there are thousands of families out there who are mired in debt, struggling to make their house payments, who now look at this big check in their mailbox, and exclaim, “Hey, now we can take that vacation to Disney!” And how many others of those same people are going to fritter theirs on a flat screen television? Or worse, yet, how many people are saying, “Now I can put a down payment on a brand new car!” (getting themselves into more debt)?

If you are smart, you will take your tax rebate check and do something smart with it:

Use it to start, or build that three-to-six month emergency fund so you don’t have to run to Mastercard every time your car breaks down.

Use the money to pay down credit card debt. Dump it on those bills that have been piling up.

Use the money to start a Roth IRA for retirement.

Use it to start a 529 plan for your kids for college.

Use it to make make much needed repairs to your home or a do a project that will increase your home’s value.

Use the money to put a dent in your mortgage.

Use it to help your favorite charities or other non-profits. (But only if you have your debt paid off and an emergency fund first.)

Use it to start your “pay-for-my-next-car-with-cash-” fund.

This money comes to us as a blessing. Using it for something disposable, something that leaves you with nothing but a memory, would be a shame. Use your tax rebate to do something practical and meaningful… something that will create security in your financial world for years to come.